United Republic of Tanzania
Third Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility and Requests for Waiver of Performance Criterion and Modification of Performance Criteria—Staff Report; Press Release; and Statement by the Executive Director for the United Republic of Tanzania
Author: International Monetary Fund
Publication Date:
03 Jun 2005
eISBN:
9781451838442
ISBN:
9781451838442
Language:
English
Keywords:
ISCR; CR; government; PRGF arrangement; Agustín Carstens; government procurement process; implementation; liquidity-injecting government expenditure; debt relief; net financing requirement; government paper; credit guarantee
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This paper evaluates Tanzania’s Third Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility and Requests for Waiver of Performance Criterion and Modification of Performance Criteria. Program objectives for the remainder of 2004/05 are fully achievable, but modest risks remain, particularly the vulnerability of the economy to unpredictable rainfall and pressures for more direct intervention by the government to address poverty alleviation. Tanzania’s fiscal strategy remains focused on enhancing domestic resource mobilization and the quality of spending to support its poverty reduction goals.

Abstract

This paper evaluates Tanzania’s Third Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility and Requests for Waiver of Performance Criterion and Modification of Performance Criteria. Program objectives for the remainder of 2004/05 are fully achievable, but modest risks remain, particularly the vulnerability of the economy to unpredictable rainfall and pressures for more direct intervention by the government to address poverty alleviation. Tanzania’s fiscal strategy remains focused on enhancing domestic resource mobilization and the quality of spending to support its poverty reduction goals.

I. Recent Economic Developments and Performance Under the Program

1. Tanzania’s macroeconomic performance in 2004 continued to evolve broadly in line with the program (Table 2). Real gross domestic product (GDP) growth is estimated at 6.3 percent, driven by a recovery in agriculture and strong growth in construction, manufacturing, mining, and tourism. Annual inflation is below 5 percent, in line with program projections (Figure 1 and Table 2),1 despite higher utility prices and petroleum price increases.

Table 1.

Tanzania: Proposed Schedule of Disbursements Under the Poverty Reduction and Growth Facility Arrangement, 2003-06

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Source: Fund staff.
Table 2.

Tanzania: Selected Economic and Financial Indicators, 2002/03-2004/05

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Sources: Tanzanian authorities; and Fund staff estimates and projections.

Data are on calendar year basis; 2002/03 data are for calendar year 2002.

Projection for 2004 is for inflation under the new CPI index.

Weighted-average yield of 91-, 182-, and 364-day treasury bills.

Excluding new debt issued to recapitalize government-owned banks.

Including change in stock.

Figure 1.
Figure 1.

Tanzania: Prices and Interest Rates, January 2000-December 2004

Citation: IMF Staff Country Reports 2005, 181; 10.5089/9781451838442.002.A001

Source: Tanzanian authorities.

2. Tanzania has sustained the strong fiscal performance that has characterized its adjustment efforts in recent years (Tables 3 and 4). The 2003/04 (fiscal year ending June) outturn was broadly as envisaged at the time of the second review (Country Report No. 04/285), with lower expenditures offsetting shortfalls in foreign program assistance.2 For the first quarter of 2004/05, continued vigorous efforts by the Tanzania Revenue Authority (TRA) to implement its ongoing reform program, notably to intensify audits and reduce tax evasion, generated revenues that were 9 percent above program expectations. Aggregate expenditure was in line with program projections, notwithstanding an unexpectedly large check float of 2003/04 expenditures into 2004/05, as spending on nonpriority goods and services was restrained to offset the impact on the financing requirement. In aggregate, the end-September performance criterion on net domestic financing was observed by a small margin.

Table 3.

Tanzania: Central Government Operations, 2002/03-2004/05 1/

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Sources: Ministry of Finance; and Fund staff projections.

Fiscal year runs from July to June.

Unidentified financing (-)/expenditure (+). Includes expenditure carryover from the previous fiscal year.

Basket funds are sector-specific accounts established by the government to channel donor support to fund-specific activities in different sectors.

Defined as a ratio (in percent) of gross grant and loan inflows to a sum of total expenditures and amortization payments.

Defined as a ratio (in percent) of current expenditures to a sum of program grants and loans (including basket funding).

Including contingent liabilities, largely consisting of non-guaranteed parastatal debt. See Country Report No. 04/284.

Table 4.

Tanzania: Central Government Expenditure on Priority Sectors, 1999/2000-2004/05 1/

(In billions of Tanzania shillings, unless otherwise indicated)

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Sources: Tanzania, Ministry of Finance.

Fiscal year runs from July to June.

Government agency created in 2001 to coordinate AIDS-related interventions.

Excludes clearance of domestic arrears and recapitalization of banks.

3. Tanzania’s 2003/04 actual current account deficit was slightly larger than envisaged at the time of the second program review, because of slightly higher than estimated imports and some disbursement delays in the last quarter. For the first quarter of 2004/05, oil imports were somewhat lower than projected because the installation of flow meters at customs caused a temporary disruption. Exports performed robustly, with a modest recovery of traditional exports and continued strong growth in the nontraditional sector, including gold and tourism. Aid inflows were slightly below expectations (Tables 7 and 8). The East African Community (EAC) customs union protocol established a common tariff regime, and progressive elimination of all tariffs on trade within the EAC was initiated on January 1, 2005.3

4. The Tanzania shilling (T Sh) appreciated against the U.S. dollar, from T Sh 1,107 at end-June to T Sh 1,043 by end-December 2004 (Figure 2). In real terms, the exchange rate remained broadly in line with its real equilibrium level.4 Export competitiveness continues to be hampered by structural factors, particularly poor infrastructure.

Figure 2.
Figure 2.

Tanzania: Exchange Rates, January 1998-December 2004

(1995=100; foreign currency per Tanzania shilling) 1/

Citation: IMF Staff Country Reports 2005, 181; 10.5089/9781451838442.002.A001

Source: Tanzanian authorities; and IMF Information Notice System (INS).1/ A positive movement represents an appreciation of the T Shilling.2/ Nominal and real effective exchange rate information up to November 2004.

5. Thus far in 2004/05, monetary policy has been consistent with the program goals (Tables 5 and 6), amid significant challenges for liquidity management. M3 growth (12-month) through September accelerated somewhat over the same period last year, but remained slightly below projections owing to lower-than-expected deposit growth. Substantial expansionary pressures on reserve money continued, mainly emanating from the high level of donor inflows of 11.8 percent of GDP in 2003/04. The BoT met the end-September ceiling on reserve money by squeezing liquidity toward the end of the quarter through stepped-up sales of government paper, higher-than-projected sales of foreign exchange, and other measures (such as repos). On account of increased sterilization operations, as well as continued strong private sector credit demand, interest rates on 91-day treasury bills rose to 10.1 percent by end-September from 7.7 percent at end-June.

Table 5.

Tanzania: Summary Accounts of the Bank of Tanzania, December 2003 - June 2005

(In billions of Tanzania shillings, unless otherwise indicated; end of period)

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Sources: Bank of Tanzania; and Fund staff estimates and projections.

Calculated as reserve requirement times banks’ deposits minus half of bank cash in vault.

Table 6.

Tanzania: Monetary Survey, December 2003-June 2005

(In billions of Tanzania shillings, unless otherwise indicated; end of period)

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Sources: Bank of Tanzania; and Fund staff estimates and projections.

6. The end-September performance criterion on net international reserves was not observed,5 although the shortfall was largely temporary and Tanzania’s official reserve position remained strong. The $174 million (10 percent) shortfall in net international reserves occurred mainly as a result of larger-than-projected one-off external payments by the government6 and higher-than-programmed foreign exchange sales.

7. The pace of core structural reforms accelerated in the areas of tax policy and administration and the financial sector. On the fiscal side, the implementing regulations for the new Income Tax Act, which include limits on the Minister of Finance’s discretionary authority to grant exemptions, were promulgated (structural benchmark), albeit with a brief delay. The TRA continued to expand coverage in the Large Taxpayer Department (LTD) and to improve audit procedures. Within customs, a new plan to modernize the administration has been initiated with initial reforms focusing on protection of the revenue base and trade facilitation (such as shortening clearance times). Separately, the new Public Procurement Act, approved in November 2004, is expected to improve efficiency by decentralizing procurement and establishing the Public Procurement Regulatory Authority.

8. The authorities’ draft financial sector reform implementation plan, linked to the FSAP agenda, was presented at a December 2004 workshop (and was well received by stakeholders). The plan focuses on key structural impediments in the financial sector, which has grown rapidly in recent years but still has a relatively small role in the economy. Some elements of the plan are already being implemented. Preparations to partially privatize the National Microfinance Bank (NMB) by mid-2005 remain on track, with final bid instructions issued in January 2005 (a structural performance criterion).7 In addition, the draft amendments to the BoT Act and the Banking and Financial Institutions Act (BFIA)—to provide greater central bank autonomy and accountability and to modernize the financial sector regulatory framework—have been prepared and have been submitted to stakeholders for review.8

9. The authorities also made progress in other priority areas of structural reform, including in the energy sector and the business environment. In the energy sector, the TANESCO expatriate management team’s contract was extended through 2006, which is expected to further improve the utility’s financial performance and prepare it for privatization. The gas-powered Songo Songo electricity plant came online in September, supplying cheaper, more reliable power. However, critically low water levels in dams have reduced hydropower output, and the power distribution network is weak. Thus, action to improve the performance of the sector remains critical.9 Separately, in the context of their program for Business Environment Strengthening for Tanzania, the authorities have prepared draft legislation to simplify the business licensing process.

II. Report on the Discussions

10. The discussions centered mainly on (i) the authorities’ efforts to accelerate economic growth, employment, and poverty reduction; (ii) prospects for meeting fiscal targets for 2004/05 and beyond and progress on tax and expenditure reforms; (iii) monetary policy and liquidity management in the context of large aid inflows; and (iv) progress in financial sector and other structural reforms (including credit guarantees).

A. Macroeconomic Outlook and Poverty Reduction Strategy

11. The program projections for real GDP growth in Tanzania of 6.3 percent in 2004 and 6.5 percent for 2005 remain appropriate, provided that rainfall is normal and energy sector problems are managed effectively.10 Assuming no significant changes in the outlook for food and oil prices, the authorities’ goal of containing annual inflation to 4.0 percent also appears attainable.

12. The authorities remain focused on accelerating growth and reducing poverty, particularly in rural areas. They agreed that the progress of recent years remains fragile, with many challenges remaining, and that meeting the Millennium Development Goals (Table 11) and making other deep and comprehensive inroads against poverty will require continued macroeconomic stability and steady implementation of ambitious structural reforms over the long term. Such efforts would merit the continued strong support of the donor community, which will be critical to Tanzania’s adjustment efforts for many years.11

13. In this context, the authorities are finalizing their second poverty reduction strategy paper, the five-year NSGRP. The draft strategy adopts an outcome-based approach (in contrast to the priority sector spending approach under the first PRSP) in three major areas: (i) growth and reduction of income poverty, (ii) improved quality of life and social well-being, and (iii) good governance and accountability. Some of the specific constraints to growth and poverty reduction targeted in the NSGRP are poor infrastructure, limited access to credit, structural impediments to agriculture and exports (such as inefficient crop boards, cumbersome business licensing requirements, substandard technology, and local nuisance taxes), and generally low productivity and capacity constraints. The draft strategy envisages the private sector as the engine of growth. It utilizes a macroeconomic framework that is broadly consistent with the PRGF and is expected to go to cabinet for approval in February and thereafter to parliament. The staff viewed the draft NSGRP as an impressive and ambitious effort and suggested that it could be further enhanced in areas such as costing and prioritization. The authorities indicated that they plan to address costing and prioritization in preparing annual budgets and the Medium-Term Expenditure Framework (MTEF).

14. The authorities expressed their resolve at the highest levels to maintain steady, prudent policies leading up to the October 2005 presidential and parliamentary elections. In this context, they provided an update on their efforts to ring-fence reforms, including by: (i) submitting amendments to the BoT Act and the BFIA to parliament following consultations with stakeholders, and (ii) reviewing the Public Finance Act and regulations—with FAD technical support—to make them consistent with the new Public Procurement Act and other recent reforms.

B. Fiscal Policy

15. The goals of the authorities’ fiscal strategy are to enhance domestic resource mobilization and improve the quality, monitorability, and efficiency of spending to support Tanzania’s growth and poverty reduction strategy. Consistent with these overall objectives, the program for 2004/05 allows for higher spending in priority areas and investment and one-off current spending for energy sector reform, replenishment of the strategic grain reserve, and national elections. This spending will be financed by higher domestic revenues, additional donor resources, and a modest increase in domestic financing (Table 3). The latter was considered appropriate in light of the government’s comfortable debt position, the manageable macroeconomic impact, and the fact that net domestic financing in the previous two years was significantly below program limits, resulting in a buildup of government deposits with the BoT.

16. The staff agreed with the authorities that the 2004/05 program target for budgetary revenues of 13.5 percent of GDP would be exceeded. The initial program projections were cautious because of the uncertain yield of the tax administration reforms that continue to underpin efforts to increase revenues. The sharp and broad-based increase in first-quarter revenues (which were 25.4 percent above the first quarter outturn of the previous year), continued buoyant economic activity, and the acceleration of tax and customs administration reforms point to an increase in the program target for revenues to about 14 percent of GDP, compared with 12.9 percent of GDP in 2003/04. In the absence of a need to adjust their programmed fiscal stance, the authorities and the staff agreed that the additional revenues would be used to relax the tight constraint on spending in nonpriority sectors, including building rehabilitation and transportation.12 Thus, domestic financing remains at 1.3 percent of GDP. The program estimate for net foreign financing (including grants) is unchanged at 10.8 percent of GDP, but with higher grants in lieu of concessional loans.

17. The staff’s tentative outlook for 2005/06 and the medium term is positive, but the need for consistent, prudent fiscal policy remains. The 2005/06 budget will be relieved from this year’s one-off spending obligations, donor inflows seem likely to be at least as high as in 2004/05, and domestic revenues should remain buoyant. With this favorable economic outlook, the staff noted there may be scope for correcting for tax distortions and lowering selected tax rates to boost the supply response of the economy without interrupting the upward trend in revenue. The government noted strong pressures to reduce the 20 percent value-added tax (VAT) rate to levels prevailing in EAC partner countries, particularly in the run-up to the elections. The staff cautioned against any significant reduction in the VAT, which would be costly and have a relatively limited impact on Tanzania’s business climate. The authorities committed to hold the line on imprudent tax cuts and sustain the revenue mobilization effort.

18. The authorities are pushing ahead with revenue administration reforms. The staff and the authorities concurred that sustained revenue growth through broadening the tax base and improving tax policy administration and efficiency was central to the authorities’ medium-term adjustment strategy and to eventually reducing reliance on donor financing. Major success has been achieved in this area, particularly during the past two years, reflecting strong political commitment, excellent implementation efforts by the TRA, and coordinated technical assistance from the Fund, the Bank, and Tanzania’s major bilateral donors (Box 1). But the ratio of revenue to GDP is still low by regional standards, and more needs to be done. The immediate priorities are: (i) further expanding the coverage of the LTD to at least 250 companies by end-June 2005 (structural benchmark); (ii) continuing the reorganization of TRA along functional lines; (iii) improving the efficiency of TRA operations; (iv) completing the quality assurance review of customs reforms by end-June 2005 (structural benchmark); (v) introducing risk management tools in customs; (vi) reducing import shipment release times; and (vii) improving overall controls on custom revenues.

19. The authorities agreed that exemptions and excessive investment incentives have, in the past, eroded the tax base and need to be contained, even though they recognize them as useful for promoting investment in appropriate circumstances. The staff and the authorities agreed that administrative controls on exemptions should be maintained, including the continued publication of the list of tax exemption beneficiaries under the Treasury Voucher scheme (quarterly structural benchmark). The government intends to submit to parliament amendments to the Tanzania Investment Act by end-February 2005, including a limit of five years on the applicability of fiscal stability clauses under the Act (structural benchmark). These amendments would put a maximum time limit on investor exemptions from any revisions to the tax code that would result in higher tax obligations to the investor. The authorities will also maintain existing limits on Export Processing Zone (EPZ) licenses (MEFP, para. 22) until Tanzania’s legal framework has been adjusted in line with the trade protocol on the EAC customs union.13

Tanzania—Achievements in Reform of Revenue Mobilization

The recent improvement in Tanzania’s tax performance stems from improvements in both revenue policy and tax administration. Tax revenue increased by 1.6 percent of GDP between 1999/00 and 2003/04, and is projected to increase another 1 percentage point in 2004/05 (Table 3). This sharp improvement has been achieved without any increase in key tax rates. Under the previous PRGF arrangement, Tanzania improved the tax system, including by introducing the Taxpayer Identification Number system in 2000, and establishing the LTD in 2001. The current program has significantly deepened these reforms. In particular:

  • The adoption of a corporate plan in July 2003 provided a roadmap for comprehensive re-organization and streamlining of the tax administration, including computerization and training, supported by the World Bank and bilateral donors.

  • The introduction of the Treasury Voucher system in 2003 to administer exemptions of NGOs curtailed substantially the abuse of existing exemptions.

  • The adoption of the new Income Tax Law based on self assessment enhanced the legislative framework for collecting income taxes by closing loopholes and broadening the tax base.

In 2004, the authorities adopted additional substantial reforms which bode well for revenue mobilization in the future:

  • With the 2004/05 budget, the stamp tax was eliminated and the VAT threshold raised, freeing up resources for activities with high revenue yield, such as VAT audits of larger companies.

  • The expansion (to 200 taxpayers) and integration along functional lines of the LTD in mid-2004 strengthened the administration of taxpayers with high revenue potential.

  • The reorganization of TRA headquarters along functional lines moved forward (regional offices are to be restructured in early 2005).

20. The authorities have strengthened the budget guideline process to (i) address weaknesses in budget preparation; and (ii) strengthen the transparency and accountability of the budget (MEFP, para. 23). The staff noted the concerns of Executive Directors and donors about the lack of comprehensiveness, specifically large infrastructure projects such as the new parliament building, in the Public Expenditure Review (PER) process which is conducted in collaboration with donors. The authorities pointed out that donors were interested in poverty-reducing sectors, but they agreed on the need for a more transparent budget process for other spending. Toward that end, the internal budget guideline process has been strengthened to review line ministries’ spending plans comprehensively in the MTEF, with clear links planned to the NSGRP, and on the basis of identifiable outcomes. The staff supported those efforts while noting that it would take some time to develop fully.

21. The authorities also agreed to take further steps to strengthen public expenditure management (MEFP, para. 23). The large and volatile check float and the carrying forward of large idle balances in government accounts complicates fiscal and monetary management. The authorities are working to address these issues, including by strengthening cash management projections.

C. Monetary Policy and Financial Sector Issues

22. The authorities reiterated their commitment to conduct monetary policy prudently, consistent with the program’s macroeconomic objectives. In this context, they discussed with the staff their reserve money path. Given strong private sector demand for credit, the absence of inflationary pressures, continued buoyant economic conditions, and a reassessment of the money multiplier, the staff agreed with the BoT that a modest increase in the targeted growth of reserve money would be supportive of growth and was not likely to pose undue risks to inflation. The authorities’ updated financial program envisages slightly higher ceilings on reserve money (Table 5). Because of the higher-than-expected foreign exchange payments in the first quarter of 2004/05, the path for net international reserves has been adjusted downwards. This change still implies additional sales of foreign exchange during the year, as well as continued strong import cover. Projected M3 growth by end-June 2005 has been raised slightly upwards, and velocity is projected to decline, consistent with the ongoing deepening of the financial system and broadly in line with the trend observed in recent years (Table 6).14

23. The authorities and the staff agreed that the principal challenge in implementing monetary policy continues to be liquidity management in the face of high foreign aid inflows. In sterilizing excess liquidity related to these inflows, the authorities have relied primarily on sales of government paper and foreign exchange. Sterilization through sales of government paper can lead to increases in short- and medium-term interest rates because of the thinness of domestic debt markets and imperfect substitutability of financial assets. This in turn can crowd out the private sector and drive up the government’s interest payments. Sterilization through foreign exchange sales can cause the exchange rate to appreciate, with a possible loss of competitiveness. The staff noted that the BoT has balanced the costs of liquidity management more effectively over the past several quarters by relying more on foreign exchange sales, and urged further reliance on such sales. The authorities agreed to consider this, depending on market conditions. The staff and the authorities also discussed ways to smooth reserve money management, including through better liquidity forecasting. The BoT noted plans to continue working with East AFRITAC to strengthen projections of liquidity-injecting government expenditures and the implementation of quantitative intervention targets. The staff and the BoT also discussed the impact of higher liquidity management costs on BoT profitability. The BoT is currently responsible for paying interest on government paper used for liquidity management,15 which, together with significant capital outlays, is adversely affecting its profitability. The staff urged the authorities to develop arrangements regarding the treatment of the interest costs of intervention that do not impede liquidity management.

24. The staff and the authorities discussed the timing and key elements of the financial sector implementation plan (MEFP, paras. 28-30). Though the plan will be finalized and submitted to the government for approval by end-May (structural benchmark), the staff urged early movement in high priority areas. Key goals of the plan include broadening access to financial services, strengthening financial markets and supervision, and managing excess liquidity. Discussions focused on two key near-term reforms: amendments to banking legislation and the NMB privatization. The authorities confirmed their intent to submit amendments to the BoT Act and the BFIA to parliament by end-February. However, subsequent to the discussions in Dar es Salaam, they informed the staff that delays in discussion of the amendments with the Zanzibar authorities would delay submission of the amendments to parliament until its April 2005 session and that to this end they would request a modification of the program performance criteria. The BoT Act amendments will boost the BoT’s legal autonomy and accountability by among other things strengthening its Board’s decision-making role and expanding the number of deputy governors. The proposed BFIA amendments will clarify the scope of regulatory and supervisory authority and provide for a prompt corrective action framework. Regarding privatization of the NMB, the authorities indicated that five pre-qualified bidder groups have been identified and the preferred bidder would be selected by end-June (structural performance criterion).

25. The staff discussed with the authorities the broad parameters of the scheme to provide credit guarantees for medium-term development finance (MEFP, para. 31). The authorities agreed to limit the total volume of government credit guarantees under their DFGF, which will partially guarantee private bank loans to recipient firms, to about 0.8 percent of GDP.16 They further agreed that the DFGF will operate on market principles, be appropriately funded from the budget, protect public resources, include transparent governance, be cofinanced with interested regional development bank partners, and provide for appropriate risk-sharing with commercial banks.17 The authorities expressed their optimism that the DFGF would promote successful, viable development-oriented projects, and would help diffuse political pressure for new development banks.

D. External Sector Policies and Prospects

26. The staff expects the 2004/05 current account deficit to remain in line with projections (Table 7). The impact of higher oil prices has been offset thus far by lower-than-programmed oil imports. Projections for aid inflows are now slightly higher than envisaged at 13.5 percent of GDP.

Table 7.

Tanzania: Balance of Payments, 2002/03-2007/08

(In millions of U.S. dollars, unless otherwise indicated)

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Sources: Tanzanian authorities; and Fund staff estimates and projections.

Arrears are on non-Paris Club official and commercial debt subject to rescheduling and currently under negotiation.

Oil price is average of spot prices for U.K. Brent, Dubai, and West Texas Intermediate.

Program and project assistance (BOP definition) in percent of GDP.

GDP number for 2003/04 column was changed to the actual (officially revised) level for comparison purposes.

27. The authorities indicated that they will continue to use foreign exchange interventions to smooth out unduly large exchange rate fluctuations and to manage liquidity, with no predetermined path for the exchange rate. They continued to express concerns about the potential loss of export competitiveness tied to efforts to mop up liquidity with foreign exchange sales. The staff believes that the exchange rate remains in line with its equilibrium level and that a potential appreciation should be weighed against the costs of alternative means to manage liquidity, particularly higher interest rates. The mission also reiterated the importance of removing structural impediments to exports, including by improving information technology, increasing labor flexibility, minimizing distortionary taxes, and reducing the costs of transport, energy and telecommunications.

28. The mission and the authorities discussed regional integration efforts within the frameworks of the EAC, the Southern African Development Community (SADC), and the Common Market for Eastern and Southern Africa (COMESA).18 The authorities noted that EAC members are continuing to review potential inconsistencies between obligations under each framework and that the new EAC protocol will not supercede any preexisting obligations. The staff encouraged the authorities to seek reductions over time in EAC external tariffs, so as to minimize the risk of trade diversion. The authorities also discussed plans to explore further EAC integration, including through a possible monetary union down the line. The staff cautioned that the preconditions for an effective monetary union do not seem to be in place.19

29. Tanzania signed a debt relief agreement with India under the HIPC framework. Debt negotiations with Japan, Brazil, and non Paris Club creditors continue, but progress remains slow. The staff encouraged renewed efforts to seek commitments from holdouts (Table 9). While Tanzania’s external debt position is sustainable (Table 10), the staff emphasized the need for ongoing prudent external debt management.

Table 8.

Tanzania: Disbursements of Program Assistance, 2003/04-2004/05 1/

(In millions of U.S. dollars)

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Sources: Tanzanian authorities; and donors.

Fiscal years run from July to June.

Poverty reduction budget support.